Chrysler Looking at Variety of Capital Sources, Marchionne Says

Nov. 4 (Bloomberg) -- Chrysler Group LLC, which is
considering refinancing loans from the U.S. and Canadian
governments, is looking “at a variety of capital sources,”
Chief Executive Officer Sergio Marchionne said today.

Marchionne, who also is CEO of Fiat SpA, has said interest
on the $7.4 billion U.S. and Canadian government loans has kept
Chrysler from earning a profit this year.

“We’re on good track to eventually get rid of this
problem,” Marchionne told reporters today in Rome.

Chrysler has contacted banks about borrowing money before a
possible initial public offering next year, two people familiar
with the effort said last month. Marchionne previously said
Chrysler’s board is looking to refinance the government loans as
it considers the company’s proper debt level.

The Auburn Hills, Michigan-based automaker has said its
effective interest rate on money borrowed from the U.S.
government is as high as 14 percent and as high as 20 percent on
the Canadian loans.

“We’re working on solutions that are designed to provide
stability in the capital structure of Chrysler in the medium to
long term,” Marchionne said today. “It’s a relatively complex
discussion.”

Chrysler could lower its interest payments by $400 million
by refinancing the debt, Stuart Pearson, an analyst with Morgan
Stanley, said in a note to investors on Nov. 3.

“We believe refinancing in the capital markets may be
possible for Chrysler by mid-2011, by which time it should have
a 12-month track record of profitability and cash generation,”
Pearson wrote.

Chrysler is scheduled to release third-quarter results on
Nov. 8. The company’s second-quarter net loss narrowed to $172
million from $197 million in the first three months of the year.
Chrysler ended the second quarter with $7.84 billion in cash.

The U.S. automaker needs to keep a minimum cash balance of
about $3 billion for working capital, Moody’s Investors Service
said in a November 2009 note.